Obama commission: Slash Social Security, reduce corporate taxes

Progressives across the US are condemning President Obama’s deficit-reduction commission for its proposal, released today, to cut Social Security payments while lowering corporate taxes and the highest income tax bracket.

The commission, put together by the White House in February, released a draft report (PDF) Wednesday that proposes deep cuts to domestic and military spending that would reduce the deficit by $4 trillion over the next 10 years. But the way in which the proposal goes about achieving those reductions has come in for heavy attack from progressive politicians, labor leaders and commentators.

“If you’re sincerely worried about the US fiscal future — and there’s good reason to be — you don’t propose a plan that involves large cuts in income taxes,” economist Paul Krugman wrote in the New York Times. Krugman pointed to an article in the Times outlining the commission’s strategy:

The proposed simplification of the tax code would repeal or modify a number of popular tax breaks — including the deductibility of mortgage interest payments — so that income tax rates could be reduced across the board. Under the plan, individual income tax rates would decline to as low as 8 percent on the lowest income bracket (now 10 percent) and to 23 percent on the highest bracket (now 35 percent). The corporate tax rate, now 35 percent, would also be reduced, to as low as 26 percent.

The commission is also proposing that Social Security contributions be increased, so that 90 percent of income is taxable, as opposed to 82.5 percent as is currently projected. Despite the increases in payments, the plan calls for a reduction in benefits for most Social Security recipients.

Additionally, the retirement age would be raised gradually, reaching 68 in 2050 and 69 in 2070.

The commission’s proposals aren’t binding, and may not necessarily end up as law. Proposals will only be sent to Congress if they garner the support of 14 of the 18 commissioners on the panel. The Hill reports that at present there isn’t that level of support on the commission for the proposal to reduce Social Security.

“These are tough times, and we can’t keep spending like they’re not,” the president said. He appointed former Clinton White House chief of estaff Erskine Bowles, and former Republican Sen. Alan Simpson as co-heads of the commission.

Followers of the commission’s progress had been expecting something along the lines of today’s preliminary proposals for some time now. In August, ex-Sen. Simpson was criticized for referring to Social Security as a “milk cow with 310 million tits!” in an email.

The comment was widely interpreted as a sign that the commission would move towards reducing Social Security benefits.